21 December 2014

There are sound reasons for being disdainful of quantitative targets in policymaking - something that forms the very basis of Social Policy Bonds. But, perhaps unfortunately, in our highly aggregated, complex, societies, the alternative to targeting broad, explicit and, most important, meaningful goals is to target narrow, opaque goals that are devoid of meaning in that they do nothing to improve social well-being.

I've blogged before about the proliferation and futility of such Mickey Mouse micro- (here and here for instance) and macro-targets (here and here). So it's disappointing, though not surprising, that the academic world is following the trend. See here, for instance, to read about cash for citations. Or here, for how to find "outfits that offer to arrange, for a fee, authorship of papers to be
published in peer-reviewed outlets. They seem to cater to researchers
looking for a quick and dirty way of getting a publication in a
prestigious international scientific journal."

If we are going to combine financial incentives with numerical targets then we need to make absolutely certain that those targets are, or are inextricably linked to, robust indicators of social well-being. The alternative? Well, it is what we have now: indicators defined not by society, but by vested interests within organizations who suspect that broad, meaningful indicators would threaten their way of doing things, their status, or indeed their existence.

09 December 2014

[N]atural selection favors the forces of psychological denial. The individual benefits as an individual from his ability to deny the truth even though society as a whole, of which he is a part, suffers. The Tragedy of the Commons,
'Science', 13, December 1968

Governments supposedly serve society's interests by regulating and taxing individual and corporate activities that are essentially self-serving. It's a process that evolved over time and, while flawed, has proven evolutionary advantages over central planning. And, perhaps because central planning as practised by the Soviet Union and others has been totally discredited, our governments seem to have relinquished their role of thinking strategically on behalf of their citizens. They are subject to the same biases and incentives to deny the truth as individuals. Whether it's environmental disaster, or nuclear catastrophe, or less spectacular but just as grievous impacts of man's inhumanity to man, or financial crises or whatever, our governments take the easy route of waiting for things to happen and then reacting. It's inefficient at best, and could be calamitous at worst. Society is so interlinked and complex that major disasters of some sort are inevitable - and extremely difficult to foresee. But government should not then deny the real possibility that these events will occur: it could, and should, think strategically and on behalf of society. By issuing Social Policy Bonds it could reduce the likelihood of disasters, say, without trying to involve itself in how and when they are likely to occur. For example: I'm reading Eric Schlosser's Command and Control, which tells alarming tales of accidents and blunders that came close to bringing about catastrophe. It's quite disturbing how little incentive the people in control, at all levels, had to think about the potential impacts on society rather than on themselves or the organization of which they were part. Social Policy Bonds that would be redeemed only after, say, 30 years of a complete absence of nuclear explosions, accidental or not, would be one way of giving people incentives to avoid such a disaster. A bond regime targeting such unforeseeable but plausible scenarios would make them less likely to occur and would do so as efficiently as possible. And by issuing Disaster Prevention Bonds government would be doing what it's supposed to do: looking out for all its citizens' interests by directing people's ingenuity into socially useful ends.

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Social Policy Bonds

See the Social Policy Bonds website for overviews and links to articles, papers, news and more about Social Policy Bonds. Click on the image below to download a 2400-word article, published by the Institute of Economic Affairs, London.

Social Policy Bonds in 2400 words

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Social Policy Bonds in the media

9 October 2015: An article by Greg Bearup on the genesis of the Social Policy Bond idea, and application of a version of it in Australia appears in the Weekend Australian Magazine. (The article can also be downloaded as a pdf from here.)

3 May 2012: An audio talk by Nobel Prize winner Professor Robert Shiller at the London School of Economics, in which Social Policy Bonds are briefly mentioned, is available here.